Antler Gold Inc. (formerly Northwest Arm Capital)

Transcription

1 (formerly Northwest Arm Capital) Unaudited Condensed Interim Financial Statements March 31, 2017

2 May 29, 2016 Management s Responsibility for Financial Reporting The accompanying unaudited condensed interim financial statements of Antler Gold Inc. are the responsibility of management and have been approved by the Board of Directors. The unaudited condensed interim consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards ( IFRS ). The unaudited condensed interim consolidated financial statements include certain amounts and assumptions that are based on management s best estimates and have been derived with careful judgment. In fulfilling its responsibilities, management has developed and maintains a system of internal accounting controls. These controls are designed to provide reasonable assurance that the financial records are reliable for the preparation of the financial statements. The Audit Committee of the Board of Directors reviewed and approved the Company s unaudited condensed interim consolidated financial statements and recommended their approval by the Board of Directors. These unaudited condensed interim consolidated financial statements have not been reviewed by the external auditors of the Company. (signed) Daniel Whittaker President and Chief Executive Officer Halifax, Nova Scotia (signed) Robert Randall Chief Financial Officer Halifax, Nova Scotia

3 Unaudited Condensed Interim Statement of Financial Position As at March 31, 2017 and December 31, 2016 Assets Current assets As at March 31, 2017 As at December 31, 2016 $ $ Cash 4,175,474 2,084,370 Amounts recoverable 183,945 84,912 Deposits and prepaid expenses 21,868 10,019 4,381,287 2,179,301 Capital assets 7,813 - Resource property (note 4) Acquisition cost 1,147,633 1,136,115 Exploration expenditures 947, ,151 Liabilities Current liabilities 2,095,023 1,658,266 6,484,123 3,837,567 Accounts payable and accrued liabilities 897, ,957 Premium liability 192,000 - Shareholders equity (note 5) 1,089, ,957 Capital stock 5,733,956 3,342,070 Warrants 48,138 14,764 Contributed surplus 50,833 - Deficit (438,566) (267,224) 5,394,361 3,089,610 Approved on behalf of the Board of Directors 6,484,123 3,837,567 (signed) Jim Megann, Director (signed) Daniel Whittaker, Director The accompanying notes form an integral part of these financial statements.

4 Unaudited Condensed Interim Statement of Loss and Comprehensive Loss For the three-month period ended March 31, 2017 Expenses Three-month Period ended March 31, Professional fees 21,123 Consulting fees 58,800 Regulatory and filing fees 11,255 Stock-based compensation 50,833 Travel 19,975 Office costs 6,522 Insurance 2,834 Loss and comprehensive loss for the period (171,342) Weighted average number of shares outstanding during the period 24,098, $ Basic and diluted loss per share (0.007) The accompanying notes form an integral part of these financial statements.

5 Unaudited Condensed Interim Statement of Changes in Equity (note 5) For the periods ended March 31, 2017, December 31, 2016 and March 31, 2016 Common Shares Share capital Warrants Warrants Contributed Surplus Deficit Total equity # $ # $ $ $ $ Balance March 31, Shares issued for cash 8,400, , ,000 Share issue costs - (1,462) (1,462) Shares issued for cash 3,000, , ,000 Share issue costs - (83,145) (83,145) Broker warrants - (15,698) 300,000 15, Shares issued for compensation 55,000 13, ,750 Shares issued for cash 6,600,000 1,650, ,650,000 Share issue costs - (69,094) (69,094) Shares issued for mineral property option 4,500,000 1,125, ,125,000 Shares issued on exercise of broker warrants 17,850 2,719 (17,850) (934) - - 1,785 Loss and comprehensive loss for the period (267,224) (267,224) Balance December 31, ,572,850 3,342, ,150 14,764 - (267,224) 3,089,610 Shares issued on exercise of broker warrants 150,000 22,845 (150,000) (7,845) ,000 Shares issued for cash 3,775,694 2,835, ,835,000 Share issue costs - (232,740) (232,740) Flow-through premium - (192,000) (192,000) Broker warrants - (41,219) 127,440 41, Stock-based compensation ,833-50,833 Loss and comprehensive loss for the period (171,342) (171,342) Balance March 31, ,498,544 5,733, ,590 48,138 50,833 (438,566) 5,394,361 The accompanying notes form an integral part of these financial statements.

6 Unaudited Condensed Interim Statement of Cash Flows For the three-month period ended March 31, 2017 Cash provided by (used in) Three-month Period ended March 31, 2017 $ Operating activities Net loss for the period (171,342) Non-cash items Stock-based compensation 50,833 Net changes in non-cash working capital balances related to operations: (120,509) Increase in amounts recoverable (99,033) Increase in prepaid expenses (11,849) Increase in accounts payable and accrued liabilities 149,805 Investing activities (81,586) Acquisition of capital assets (7,905) Resource property expenditures (436,665) Financing activities (444,570) Proceeds from issuance of common shares - net 2,602,260 Proceeds on the exercise of warrants 15,000 2,617,260 Net change in cash during the period 2,091,104 Cash Beginning of period 2,084,370 Cash End of period 4,175,474 The accompanying notes form an integral part of these financial statements.

7 1. Nature of operations Antler Gold Inc. ( Antler or the Company ), formerly Northwest Arm Capital Inc., was incorporated under the Canada Business Corporations Act on March 23, The Company is classified as a Tier 2 Company as defined in the TSX Venture Exchange (the Exchange ) Policies. The principal business of the Company is the exploration and development of mineral properties. The Company s corporate office is located at 1969 Upper Water Street, Suite 2001, Halifax, Nova Scotia B3J 3R7. The registered head office of the Company is located at 1969 Upper Water Street, Suite 1300, Halifax, Nova Scotia, B3J 2V1. The Company's Common Shares were listed for trading on the Exchange as a Capital Pool Company ( CPC ) at the close of business on September 9, 2016 and on September 12, 2016 the Company completed its Initial Public Offering ( IPO ) of 3,000,000 common shares at $0.10 per common share, qualified by the Company's prospectus dated August 19, On November 8, 2016, the Company closed its qualifying transaction ( QT ) with the acquisition of an option to acquire a 100% interest in a gold exploration property in central Newfoundland known as the Wilding Lake project (the Project ). The option was acquired from Altius Minerals Inc. ( Altius ) in exchange for the issuance of 4,500,000 common shares of the Company and may be exercised provided the Company incurs $500,000 in exploration expenses on the Project within one year of the option agreement signing. Altius has also retained a 2% net smelter royalty over the Project. The Company simultaneously closed a private placement financing issuing 6,600,000 shares at a price of $0.25 per share for gross proceeds of $1,650,000. The Company is in the process of exploring its resource properties and has not yet determined whether these properties contain ore reserves that are economically recoverable. To date, the Company has not earned significant revenues and is considered to be a development stage enterprise. 2. Significant accounting policies Statement of compliance The Company prepares its unaudited condensed interim financial statements in accordance with Canadian generally accepted accounting principles as set out in the Handbook of Chartered Professional Accountants of Canada Part 1 ( CPA Canada Handbook ), which incorporates International Financial Reporting Standards ( IFRS ) as issued by the International Accounting Standards Board ( IASB ). These unaudited condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting ( IAS 34 ), as issued by the IASB. Accordingly, certain information normally included in annual financial statements prepared in accordance with IFRS, as issued by the IASB, have been omitted or condensed. The unaudited condensed interim financial statements should be read in conjunction with the Company s annual audited financial statements for the year-ended December 31,

8 2. Significant accounting policies (continued) Statement of compliance (continued) The policies applied in these unaudited condensed interim financial statements are based on the IFRS as of May 26, 2017, the date the Board of Directors approved the financial statements. Any subsequent changes to IFRS that are given effect in the Company s annual financial statements for the year-ended December 31, 2017 could result in the restatement of these unaudited condensed interim financial statements. Basis of presentation The condensed interim financial statements financial statements have been prepared on a historical cost basis except for any financial assets and liabilities classified as available for sale. The Company s functional currency is the Canadian dollar and these unaudited condensed interim financial statements are presented in Canadian dollars. Significant accounting policies These financial statements have been prepared using the same policies and methods of computation as the annual consolidated financial statements of the Company for the year-ended December 31, Refer to note 2, Significant Accounting Policies, of the Company s annual financial statements for the year-ended December 31, 2016 for information on the accounting policies as well as new accounting standards not yet effective. 3. Capital Management The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to continue as a going concern. The Company considers capital to be shareholders equity. The Board of Directors does not establish quantitative return on capital criteria for management but rather relies on the expertise of the Company s management to sustain future development of the business. 4. Resource properties On November 8, 2016, the Company completed its QT the acquisition of an option to acquire a 100% interest in the Project in exchange for issuing 4,500,000 common shares of the Company to Altius and a 2% net smelter royalty on any future mineral production. The acquisition of the option was accounted for as an asset acquisition and the shares issued were valued at $0.25 each for total acquisition cost of $1,125,000. On November 10, 2016, the Company received notice from Altius that it had staked an additional 171 claims within the five kilometer Area of Interest ( AOI ) as outlined in the Option Agreement. The Company agreed to reimburse Altius a total of $11,115 for its staking claims and these claims have been included in the Option Agreement. 8

9 5. Resource properties (continued) The acquisition costs of the Project are summarized as follows: Value $ Balance March 23, Issued 4,500,000 shares to acquire option on resource property 1,125,000 Acquired 171 additional claims within area of interest 11,115 Balance December 31, ,136,115 Acquisition costs 11,518 Balance March 31, ,147,633 During the period September 16, 2016, the signing of the Option Agreement, to December 31, 2016, Altius, as operator of the project, incurred a total of $522,151 of exploration expenses on behalf of the Company. Pursuant to the terms of the Option Agreement, the Company made a refundable loan to Altius of $100,000 on October 31, 2016 which was credited to exploration expenses incurred on the Project. During the quarter ended March 31, 2017, the Company incurred a total of $436,757 of exploration expenses on the Project. The following table details the exploration expenditures incurred during the periods from September 6, 2016 to December 31, 2016 and the quarter ended March 31, 2017: Period ended December 31, 2016 Quarter Ended March 31, 2017 Balance March 31, 2017 $ $ $ Personnel 140,322 14, ,865 Contractors 155,121 35, ,580 Consultants 54,546 19,200 73,746 Analytical Field expenses and equipment 43,667 47,178 24,656 72,557 68, ,735 Geophysics 26, , ,309 Travel and office 23,169 1,151 24,320 Services fee 31,316 23,196 54, , , ,390 9

10 5. Shareholders equity i) Capital Stock Authorized: Unlimited number of common shares, without nominal or par value During the period March 23, 2016, the date of incorporation, to June 30, 2016 the Company issued a total of 8,400,000 common shares at $0.05 per common share for gross proceeds of $420,000. The Company incurred share issuance costs of $1,462. These common shares will be held in escrow pursuant to the requirements of the Exchange. The terms of escrow agreement stipulate that 840,000 (10%) of the escrowed shares can be released upon final Exchange acceptance of the QT, which occurred on November 8, The remaining escrowed shares will be released at a rate of 1,260,000 (15%) every six months thereafter. On March 31, 2017, 7,560,000 shares remained in escrow. On September 12, 2016, the Company completed its IPO, issuing 3,000,000 common shares at $0.10 per share, qualified by the Company's prospectus dated August 19, The Company appointed Haywood Securities Inc. (Haywood) as its agent for the IPO and incurred direct share issuance costs of $83,145. The Company also issued Haywood two year broker warrants to purchase 300,000 common shares at a price of $0.10 per share. The fair value of the warrants of $15,698 has been recorded as a non-cash share issue cost. As part of Haywood s IPO compensation, it was granted a right of first refusal to act as financial advisor, lead agent or lead underwriter with respect to a minimum 60% syndicate participation in any future financings by the Company until the earlier of the completion of the Company's QT and 24 months from the date of closing of the IPO (the ROFR ). Subsequently, Haywood agreed to waive its ROFR with respect to the Financing. In exchange, the Company agreed to pay Haywood, compensation of $13,750 and 55,000 common shares, which were valued at $0.25 per share. On November 8, 2016, the Company completed its QT, being the acquisition of an option agreement with Altius to acquire a 100% interest in the Project in exchange for 4,500,000 common shares and granting a 2% net smelter royalty. The acquisition was accounted for as an asset acquisition and the shares issued were valued at $0.25 per common share, based on the share price of the concurrent financing, for total acquisition costs of $1,125,000. The Company also completed a private placement, concurrent with the QT, issuing 6,600,000 common shares at a price of $0.25 per share for gross proceeds of $1,650,000. The Company incurred share issuance costs of $69,094 with this financing. On November 16, 2016, Haywood exercised 17,850 broker warrants for proceeds of $1,785. The share price on the date on which the warrants were exercised was $0.62. On February 24, 2017, the Company completed an equity financing for gross proceeds of $2,835,000 comprised of the sale of 2,495,600 common shares at $0.70 per share and 1,280,094 flow-through common shares at $0.85 per share. 10

11 5. Shareholders equity (continued) i) Capital Stock (continued) Mackie Research Capital Company acted as lead agent on behalf of a syndicate including Haywood Securities Inc. and PowerOne Capital Markets Limited (the Agents ). The Agents received cash commissions equal to $148,203 and were issued 127,440 broker warrants with an exercise price of $0.70 per common share and an expiry date of August 24, The commissions and fair value of these warrants of $41,219, as calculated using the Black-Scholes option pricing model, are also recorded as share issuance costs. The Company incurred other direct share issuance costs of $84,537. The Company also recorded a flow-through premium of $192,000. On March 7, 2017, the Company received proceeds of $15,000 from the exercise of 150,000 warrants. The share price on the date the warrants were exercised was $0.70. ii) Stock options The Company has a stock option plan (the "Plan") for directors, officers, employees and consultants. The Board of Directors have the authority to issue up to 10% of the issued and outstanding common shares of the Company. The options can have up to a ten-year life and the vesting period is set by the Board. Options are granted at a price no lower than the market price of the common shares. On March 5, 2017, the Company granted 750,000 stock options to directors, officers, employees and consultants. The options are exercisable at a price of $0.80 per share and expire on March 5, The options will vest at a rate of 50% of the total on each of the six and 12 month anniversaries of the grant date. The estimated fair value of options recognized has been estimated at the grant date using the Black-Scholes option pricing model. Option pricing models require the input of highly subjective assumptions, including the expected volatility. Changes in the assumptions can materially affect the fair value estimate and, therefore, the existing models do not necessarily provide a reliable estimate of the fair value of the Company s stock options. Weighted average assumptions used in the pricing model for the options issued during the period ended March 31, 2017 were as follows: Risk free interest rate 0.58% Expected volatility 100% Expected dividend yield - Expected life 5 years Weighted average fair value per option $ ,645,854 options were available for granting under the Plan of which 750,000 were granted during the quarter. Based on the Black-Scholes option pricing model and the assumptions outlined above, the estimated fair value of the granted options is $406,666. This amount is amortized over the vesting period and $50,833 has been expensed during the quarter ended March 31, As at March 31, 2017, no options were vested. 11

12 5. Shareholders equity (continued) ii) Stock options (continued) Changes in stock options during the period ended March 31, 2017 are summarized as follows: Expiry Date Exercise Price Number of Options $ Balance December 31, Options granted March 5, 2022 $ ,000 Balance March 31, 2017 $ ,000 iii) Warrants Pursuant to the IPO, Haywood received 300,000 broker warrants to purchase 300,000 common shares at a price of $0.10 per share. These warrants expire on September 12, These broker warrants are recorded at fair value which has been estimated using the Black-Scholes option pricing model. As part of the February 2017 financing, the Agents received 127,440 broker warrants with an exercise price of $0.70 and an expiry date of August 24, The assumptions used in the pricing model and fair value results are as follows: IPO Warrants Feb Warrants Risk free interest rate 0.58% 0.58% Expected volatility 100% 100% Expected dividend yield - - Expected life 2 years 2 years Fair value per warrant $0.052 $0.323 Share issue costs non-cash $15,698 $41,219 The changes in the Company s warrants during the period ended March 31, 2017 are summarized as follows: Expiry Date Exercise Price Number Ascribed Value $ $ Balance March 23, Broker warrants issued Sept. 12, 2018 $ ,000 15,698 Warrants exercised (17,850) (934) Balance December 31, ,150 14,764 Warrants exercised (150,000) (7,845) Broker warrants issued August 24, 2018 $ ,440 41,219 Balance March 31, ,590 48,138 12

13 6. Related party transactions a) Operating agreement with Altius: Exploration services were provided by Altius as operator of the Project and a significant shareholder. These exploration activities included an administration fee of $23,196 for the quarter ended March 31, 2017 (period ended December 31, $31,316). b) Compensation of key management personnel: Management and consulting fees in the amount of $85,500 for the quarter ended March 31, 2016 (period ended December 31, 2016 accrued $77,000) were accrued for services of the President and CEO, a Strategic Advisor, the CFO and a Director of the Company. The transactions were in the normal course of operations and were measured at the exchange amounts, which are the amounts agreed to by the related parties. 7. Financial instruments Credit risk The Company's financial assets include cash and amounts recoverable. The Company's maximum exposure to credit risk, as at period-end, is the carrying value of its financial asset. The Company manages credit risk by maintaining its cash in trust with the Company s lawyer. Liquidity risk The Company s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at March 31, 2017, the Company had a cash balance of $4,175,474. The Company s ability to continue to meet its liabilities when due, beyond the current cash balance, is dependent on future support of shareholders through public or private equity offerings. Fair value During the period ended March 31, 2017, there were no transfers between level 1, level 2 and level 3 classified assets and liabilities. The fair values of the Company s financial instruments are considered to approximate the carrying amounts. The following table provides the disclosures of the fair value and the level in the hierarchy. Level 1 Level 2 Level 3 Cash $ 4,175,474 $ - $ - Amounts recoverable - 183,945 - Accounts payable and accrued liabilities - 897,762-13

14 8. Income Taxes a) Deferred income tax recovery differs from the amount that would be computed by applying the federal and provincial statutory income tax rate of 31% to net loss before income taxes. The reasons for the difference are as follows: December 31, 2016 $ Loss before income taxes 267,224 Income tax recovery based on substantively enacted rates 82,839 Current year loss and deductible temporary differences for which no asset recognized (82,839) b) The following deductible temporary difference and non-capital losses have not been recognized in the financial statements: December 31, 2016 $ Non-capital loss carry-forwards 266,888 Financing fees 151,903 - The non-capital tax losses expire in Commitments The Company has consulting arrangements with the certain executives including the President and CEO and a Consultant of the Company which provides that, should a change in control event occur, they may individually elect to terminate their employment with the Company, in which event the Company is required to pay a lump sum payment equal to two times the annual compensation. The payment of these change in control settlements would be subject to the Company maintaining an average market capitalization in excess of $10 million, based on any 10-day volume weighted trading price within the three-month period following the effective date of the change in control. These agreements may also be terminated by the Company or Consultant with three months notice. If these agreements are terminated by the Company, an amount equal to one year s annual compensation will be payable. At March 31, 2017, the Company has a management services agreement with a Company owned a director and consultant of the Company for the provision of management services, rent and other office costs, at a fee of $3,000 per month commencing February 1, 2017 and continuing until both parties mutually agree to terminate. 14

15 10. Subsequent event Resource property option agreement The Company entered into an option agreement with Altius for the right to earn a 100% interest in 1,678 mineral claims representing six separate projects in central Newfoundland (the Transaction ). Under the terms of the option agreement, Antler has the exclusive right to earn a 100% interest in these claims by issuing 980,000 common shares to Altius and incurring exploration expenditures of at least $300,000 within 12 months from the closing of the Transaction. Altius will also retain a 2% net smelter royalty on any future mineral production on the six projects. Antler also has an option from Altius to earn a 100% interest in the Wilding Lake Gold Project in central Newfoundland. In connection with that option, Altius became an insider of the Company and currently holds 4,500,000 common shares or approximately 17% of the issued and outstanding shares. Therefore, the Transaction constitutes a Related Party Transaction under TSX Venture Exchange (the Exchange ) policies and shareholder approval may be required by the Exchange to approve the Transaction. Following completion of the Transaction, Altius will own 5,480,000 common shares or approximately 19.94% of the issued and outstanding shares. Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and, if applicable pursuant to Exchange requirements, majority of the disinterested shareholder approval. 15